Kazakhstan to issue Islamic bonds
According to its press release, the Development Bank Board of Directors decided to issue and offer short-term Islamic bonds Sukuk "Al-Murabaha" in compliance with Malaysian legislation. Estimated issue volume of bond programme is around US$ 500 million. The amount of the first emission is expected to make up US$ 200-$300 million for at least 5 years. To date, the Development Bank and its advisors addressed officials of Kazakhstan to define the order and regulations on issuance of Sukuk "Al-Murabaha" bonds.
Earlier this year, the Government of Kazakhstan announced development of modifications in legislation aimed on formation of standards on issuing Sukuk for companies that are not representing national holdings and Islamic banks. With that, the Government expects expansion in number of companies willing to issue Sukuk bonds.
Issuance of Islamic bonds is similar to traditional, but structured to comply with the Sharia law. There is no interest or payments charged on Sukuk. Certificate holders of Sukuk "Al-Murabaha" own its commodity and are entitled to its final sale price upon the re-sale of the commodity. Only in the primary market there is a feasible possibility of having a legally accepted Murabaha-based Sukuk.
The Development Bank was considering issuing Islamic securities and particularly Sukuk since 2010. At the Forum of Islamic Finance held on January 25, 2010, Development Bank managing director Eldar Tenizbayev shared his expectations on positive perception of Sukuk bonds in the Kazakhstan market when released.
Kazakhstan plans to further develop its financial market by cooperating with reliable partners in economical, political and cultural spheres from Islamic countries to attract investments and financial instruments on Kazakhstan's internal projects realization.
According to experts, individuals will be more interested in buying Sukuk due to the fact that bigger investors have been already well-integrated into the Western markets. Still, with coming changes in the legislation, the Kazakhstan market of Sukuk issuance might actively expand.
Sukuk "Al-Mubaraha" is a type of Islamic financial borrowing when the creditors' interest is not the accrual of interest on a principal debt, but the difference between the price of buying by creditors and the price of selling to a borrower of exchange commodities, the Kazakh MFA's press service said.